Euro Sell Struggles to Sustain Upside Momentum

The Euro sell pair shows signs of fresh buying and benefits from a weakened USD. However, the lack of follow-through beyond the 1.0930-35 confluence level warrants caution among traders. The pair has managed to regain some positive traction and spike to a three-day peak around the 1.0935 area during the Asian session on Tuesday. Although it certainly has struggled to capitalize on the move beyond the 100-hour Simple Moving Average. That way, it has finally retreated a few pips in the last hour.

Positive Traction for EUR/USD, But Caution Warranted

EUR/USD’s rebound from May lows justifies a U-turn from the 50-day Exponential Moving Average (EMA) around 1.0850, indicating bullish sentiment. The MACD signal and RSI (14) line also present positive indications. As the pair aims for the resistance area surrounding 1.0950 and 1.1000, which comprises multiple levels marked since early April, the technical analysis suggests the potential for further upside.

On the flip side, the immediate downside for the EUR/USD pair is protected by the 1.0900 mark, followed by the 23.6% Fibonacci level around the 1.0880 region. To support the possibility of a significant decline, it may be necessary for the price to break below the swing low of approximately 1.0845 from last week. In such a scenario, it could prompt technical selling and accelerate the fall toward the 100-day SMA, currently situated around the 1.0810-1.0800 area. Failure to defend these support levels would shift the bias in favor of bearish traders and make the EUR/USD pair vulnerable to further weakening below the intermediate support of 1.0765-1.0760, potentially challenging the 1.0700 round-figure mark.

EUR/USD’s Rebound Faces Key Catalysts and USD Weakness

The positive traction for the EUR/USD pair can correlate with a relatively weaker US Dollar. Currently, it remains on the defensive for the second consecutive day. The Federal Reserve’s hawkish outlook has helped limit the downside for the USD. Meanwhile, traders also remain cautious about placing aggressive bets around the shared currency. Concerns about economic headwinds stemming from rapidly rising borrowing costs have left the European Central Bank (ECB) facing a policy dilemma.  The disappointing release of flash Eurozone PMIs reflected on the matter.

Additionally, the USD weakness is influenced by China’s risk-on mood and the advocacy for easier rules for Chinese equities’ listing, along with headlines suggesting reduced fears surrounding Moscow’s activities. The USD has faced additional pressure due to the lower-than-anticipated fixing of the USD/CNY price by the People’s Bank of China (PBoC) and the alleged selling of the US Dollar by Chinese state banks in offshore currency markets.

Hawkish ECB Comments on EUR Swap Rates

In the midst of the EUR/USD investing rebound, comments from ECB provide some support to Euro bulls. Besides, officials from Germany’s Bundesbank expressed optimism as well. ECB policymaker Martin Kazaks recently stated that he sees the central bank raising interest rates beyond the July meeting if inflation remains too high. Meanwhile, Germany’s Bundesbank ruled out recession woes in its monthly report. That indicated that the German economy appears to have bottomed out. Now, they are expected to post small growth in Gross Domestic Product (GDP) in the second quarter (Q2).

Looking ahead, the market will closely watch the upcoming speeches. Actions by ECB President Christine Lagarde during the ECB Forum will be under the radar as well. Lagarde’s remarks and the tone of the ECB’s communication will be essential in determining whether the central bank will adopt a more hawkish stance. The stance could have implications for the best Euro sell rate. Additionally, strong US statistics, such as the Durable Goods Orders for May and the US Conference Board’s (CB) Consumer Confidence for June, will be important factors to watch as they could exert pressure on the pair.

Technical Outlook and Resistance Levels

From a technical standpoint, the 100-hour SMA coincides with the 50% Fibonacci retracement level of the recent corrective decline from the monthly peak reached last week. This confluence makes it prudent for traders to wait for sustained strength. Acceptance also may occur above the 1.0930 – 1.0935 zone before positioning for any further gains. Should the pair break above this resistance level, it might climb back toward the psychological mark of 1.1000. There is still potential for further upside toward the next relevant hurdle near the 1.1080 – 1.1090 supply zone.

In summary, the Euro sell pair faces a critical juncture as it attempts to sustain its rebound. Technical factors, including key resistance levels and indicators, along with economic developments, such as ECB statements and US data releases, will play a crucial role in determining the pair’s direction in the coming days. Traders should closely monitor these factors to make informed decisions in the dynamic currency market.

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